Saturday, May 16, 2009

The Descent Into Tribalism

Ordered by Congress to "buy American" when spending money from the $787 billion stimulus package, the town of Peru, Ind., stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto. After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA.

I try to explain this in online debates. I labor in vain to explain it at parties. I blog about it at least every two weeks. I point back to the causes of The Great Depression.

I get nowhere.

Let's try again....

A "Buy American" provision in a piece of legislation is no different than a "Boycott Foreigners" provision.

This pisses off the foreigners, and they pressure their governments to retaliate.

Outrage spread in Canada, with the Toronto Star last week bemoaning "a plague of protectionist measures in the U.S." and Canadian companies openly fretting about having to shift jobs to the United States to meet made-in-the-USA requirements. This week, the Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts -- the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.

But wait, there's more ! !

Take, for instance, Duferco Farrell Corp., a Swiss-Russian partnership that took over a previously bankrupt U.S. steel plant near Pittsburgh in the 1990s and employed 600 people there.The new buy American provisions, the company said, are being so broadly interpreted that Duferco Farrell is on the verge of shutting down. Part of an increasingly global supply chain that seeks efficiencies by spreading production among multiple nations, it manufactures coils at its Pennsylvania plant using imported steel slabs that are generally not sold commercially in the United States. The partially foreign production process means the company's coils do not fit the current definition of made in the USA -- a designation that the stimulus law requires for thousands of public works projects across the nation.

There are only two reasons we could have ignored this much history to do something this destructive.

Pick one: 1) the Swiss and the Russian owners of this company can't contribute to election campaigns, or 2) Barack Obama is a drooling idiot.

Neither choice reflects well on us.

In recent weeks, its largest client -- a steel pipemaker located one mile down the road -- notified Duferco Farrell that it would be canceling orders. Instead, the client is buying from companies with 100 percent U.S. production to meet the new stimulus regulations. Duferco has had to furlough 80 percent of its workforce.

"You need to tell me how inhibiting business between two companies located one mile apart is going to save American jobs," said Bob Miller, Duferco Farrell's executive vice president. "I've got 600 United Steel Workers out there who are going to lose their jobs because of this. And you tell me this is good for America?"

Bob, your largest client purchased cold-rolled or hot-rolled steel from you because you had the best product for the best price. This created a substantial savings for the end users, whether they were purchasing cars, knives, lawnmowers, scissors or road signs. And what did we consumers do with these savings?

People are incredibly creative, and I'm not just talking about Tennessee Williams, Verdi, or Dale Earnhardt, Jr.

I'm talking about Russian and Swiss steel manufacturers. Canadian pop-rivet suppliers. Israeli electronics distributors, They've all allowed us to save time and money. They've allowed us to come down from the trees, take advantage of their wonderful inventions, and profit from them. And you shouldn't have to be from Russia, Switzerland, Canada, or Israel to benefit from their work.

Here's one of my favorite NickM quotes. (Nick's "Counting Cats" site is down today for some reason. Perhaps the British Blog embargo is already underway.... Otherwise, I'd link it.)

"We emerged from tribalism and through the PC mob we are returning to tribalism."

If there's a better way to explain what we're now seeing, I'm all ears.

2 comments:

I'm not so sure there are only 2 reasons.. I think a more likely scenario is that "buy American" is a good concept - why help out the economies of other countries while our factories are closing down - but the implementation (as usual) is too extreme. Rater than enforcing protectionism, instead the stimulus money could be used to modernize and update US production so that it is competitive.

Want real stimulus, instead of Potemkin-like bailouts? Give substantive, no token, tax rebates - even full and years-long tax relief to U.S. households, along with tax abatements and loans to businesses willing to settle in places like Detroit - thus stimulating and revitalizing regionally-depressed neighborhoods, towns and cities. Bailing out the big-cheese banks who're (sp?) still charging 30%+ on credit cards of the worst-off isn't going to affect anything. Cheers, Tom